Tuesday, July 30, 2019


* The TAX FOUNDATION explains what is no surprise to me in “A Growing Percentage of Americans Have Zero Income Tax Liability”.

Despite occasional dips, the trend has been an increase in the percentage of nonpayers {taxpayers who owe zero income taxes after taking their credits and deductions} from 28 percent in 1950 to 33.4 percent in 2016.”

As policymakers debate narrow taxes on small groups of individuals, they should keep in mind that the income tax base itself has been narrowing for decades, as more and more people pay no income taxes. Tax credits continue to shrink the tax base and raise the percentage of nonpayers. If policymakers want to increase revenue significantly, they will have to look to broad-based taxes that fall on everyone, rather than targeted taxes on select groups.”

Many taxpayers actually “make a profit” by filing a Form 1040 – receiving a refund of more than the amount, if any, that they paid in.  And often fraudulently.  This is due to the various “refundable” tax credits available.

I have always opposed using the Form 1040 to distribute government welfare and other benefit program benefits, especially via refundable credits.  And I believe every American who is no longer a full-time high school or college student should pay some income tax – even if only $100.  A true “minimum tax”.

* Kay Bell tells us “Grassley makes a case for tax extenders, which were omitted from budget deal” at DON’T MESS WITH TAXES.

Let’s get this straight once and for all –

(1) Perpetual “tax extenders” is a stupid policy.  If a deduction or credit is appropriate it should be made part of permanent tax law.  The Republicans in Congress did not consider these extenders to be appropriate when writing and passing the GOP Tax Act – or actually the people who wrote the law did not (no Republican in Congress actually read the entire Act, and neither did any Democrat, because they were told to vote against it regardless of what was in it).

(2) Making the tax extenders, or any tax law, retroactive to a year that has come and gone, requiring tons of amended returns, is even worse tax policy and should NEVER be done.

(3) Most, if not all, of the tax extenders are not “appropriate” and do not deserve to be extended, as they are specific “loopholes” for specific industries and taxpayers.

Got it?

* Tony Nitti returns after a 2-month hiatus and brings back “Tax Geek Tuesday” at FORBES.COM with “You Sold Your House – Is the Gain Taxable?”.

* Also at FORBES.COM, TaxGirl Kelly Phillips Erb reports “IRS Issues Guidance On Preventive Care And Health Savings Account Plans” –

The Internal Revenue Service (IRS) has added treatments for a range of chronic conditions to the list of preventive care benefits that may be provided by a high-deductible health plan (HDHP) in tandem with a health savings account (HSA).”


What does so-called “reality tv” do?

It takes greedy self-absorbed individuals, totally devoid of self-respect and common sense and with questionable intelligence, puts them in unnatural situations, encourages them to act outrageously, and films everything they do.

This is not entertainment, and certainly has nothing to do with “reality”.

Reality tv is a partial cause of, and a continuing result of, the “dumbing down of America”.

If you don’t think reality tv is dangerous – remember that the undeserved credibility and celebrity provided by “The Apprentice” is a major reason we currently have a tv cartoon clown in the White House.


Monday, July 29, 2019


I have updated and revised my compilation of "Tax Professionals Forms, Schedules and Worksheets".  

As you know, I have been preparing 1040s since 1972.  Over the years I have developed a collection of forms, schedules and worksheets that have proven very helpful in my practice.  

Some of my forms are given to clients to help them provide me with the information I need to properly prepare their returns. Some are used as “memos” to the client’s copy and my office file copy to back-up items reported on the returns. Others are used as attachments to the returns.  These forms have been updated to reflect the changes made by the GOP Tax Act.

I offer this compilation to fellow tax professionals for only $8.95!  Members of the National Association of Tax Professionals receive a 15% discount and pay only $7.60

Please be aware that this is copyrighted material and is for use in your practice only.  None of these items may be reprinted, as originally presented or edited or revised, individually or in any combination, or as part of another electronic, print or online publication, for sale to any party.

Here are the items included in the compilation:


1. Statement of Municipal Interest
2. Statement of US Government Obligations Income
3. State Tax Adjustments
4. Statement of Dividend Income


1. Medical Expense Worksheet 
2. Medical Expense Log
3. Medical Mileage Worksheet
4. Medical Expenses – Out of Pocket Anaylsis
5. Acquisition Debt Worksheet (example included)
6. Home Equity Debt Worksheet (example included)
7. Statement of Non-Cash Contributions 
8. Charitable Contribution Record – for cash contributions 
9. Gambling Log
10. Summary of Casino Gambling Activity Log


1. Allocating Business Expenses to Schedule C
2. Automobile Expense Worksheet
3. Auto Mileage Log
4. Business Expenses of a Freelance Writer
5. Business Travel Record
6. Computer Use Log
7. Election to Deduct Organization Expenses 
8. Employee Expense Report
9. Employee Time Card
10. Home Office Deduction Worksheet
11. Schedule C Worksheet


1. Cost Basis Worksheet


1. Rental Income and Expenses – Multi-Family Home
2. Statement of Rental Income and Expenses
3. Statement of Rental Income and Expenses – Vacation Property


1. Does Not Have To File
2. IRA Contribution Record
3. Joint vs Separate Analysis
4. Joint vs Separate Analysis – NJ State
5. General Statement Form


1. Cell Phone Log
2. Depreciation Schedule – Rental Real Estate 
3. Medical Expense Analysis
4. Statement of Investment Income
5. Statement of Pension Income and Annuity Income
6. General Analysis Form

The package will be sent as a two (2) “word document” email attachments, so you may edit and revise them to personalize them to your firm, customize them be more relevant to your particular practice, clients or specific professions, or update for annual COLAs or tax law changes.

Send your check or for $8.95, or $7.60, payable to TAXES AND ACCOUNTING, INC and your email address and NATP Membership Number to – 

HAWLEY PA 18428    

As always, if you order this compilation your thoughts, comments and suggestions are solicited and welcomed.


Wednesday, July 24, 2019


An excellent summary of the Mueller Report from Senator Elizabeth Warren, who actually read the entire report -

"Part one, a hostile foreign government attacked our 2016 elections for the purpose of getting Donald Trump elected.  

Part two, then-candidate Donald Trump welcomed that help. 

And part three, when the federal government tried to investigate part one and part two, Donald Trump as president delayed, deflected, moved, fired, and did everything he could to obstruct justice.

If he were any other person in the United States, based on what’s documented in that report, he would be carried out in handcuffs." 

Certainly much more accurate than the nonsense in the 4-page summary from Barr.


Tuesday, July 23, 2019


* CPA PRACTICE ADVISOR provides us with a “State-by-StateList of Back to School and Summer Sales Tax Holidays for 2019”.

* Dean Hedeker of Next Avenue talks about two excellent “2019 Tax Savings Strategies For Retirement” – two items that I have touted and discussed in detail here at TWTP in the past.

See my posts “Wunnerful Wunnerful” and “Donor Advised Funds”.

* I just came across this item from February on Facebook.  The JOURNAL OF ACCOUNTANCY tells us “Taxpayers will file QBI deduction computation with IRS next year” on a newly created form.

The IRS on Friday posted a draft of a form that affected taxpayers will submit with their 2019 tax returns showing how they computed their qualified business income (QBI) deduction under Sec. 199A. Taxpayers who have QBI, qualified real estate investment trust (REIT) dividends, or qualified income from a publicly traded partnership (PTP) will use Form 8995, Qualified Business Income Deduction Simplified Computation, to report the computation.”

* Liz Farr discusses the importance of filing Form 8606 in “Avoid future taxes by filing Form 8606 for nondeductible IRA contributions” at FIRM OF THE FUTURE.

It is very important to file a Form 8606 each and every year to report the carryover even if there is no contributions to, deductible or non-deductible, or withdrawals from an IRA account.

And it is important for those who inherit an IRA to determine if the deceased had a “basis” in the IRA and included a Form 8606 with the final Form 1040.  Executors should tell beneficiaries of the existence of a “basis” in a deceased’s IRA from non-deductible contributions made – perhaps by giving them a copy of the final Form 8606.

* Jason Dinesen of DINESEN TAX TIMES, whose posts have appeared in the BUZZ often, has posted after a 6-month absence.  I had been a bit worried, but am glad he is ok.  As he explains his post involves “a practice-management topic” and discussed “Trends I Am Noticing in the Tax Field”.

It does, however, identify some items that are important for taxpayers to understand –

* Tax laws are actually written by underlings and lobbyists who have political agendas.

* The laws are then passed by Congresspeople who don’t even read what they’re voting on (but who get to spike the football for a “victory”).

* Congress slashes the IRS budget to the bone but relies on the IRS/Treasury to come up with regulations and procedures on the laws Congress has passed.

* Meanwhile tax preparers are left trying to interpret these things too, often with confusing or contradictory (and sometimes non-existent) guidance. All while dealing with clients who have rising expectations without being able to articulate what those expectations even are.”

Jason promises to continue his discussion in a future post, which I am looking forward to reading.


It is obviously clear to anyone with eyes, ears and a brain that Donald T Rump the man is a worthless piece of garbage – devoid of humanity and without any value.  He does not possess a single redeeming human quality.

Trump is a racist, a sexual predator, a crook and con man, and the ultimate textbook malignant narcissist.  His words, tweets and actions are totally unacceptable and indefensible.

Any person who affirmatively supports and defends Trump the man and his continuation in office is as deplorable and despicable as Trump himself.

This has nothing to do whatsoever with partisan politics. It is about true patriotism and just plain human decency.


Wednesday, July 17, 2019


Many first-time home-buyers take a distribution from their company’s 401(k) retirement plan to help fund the down payment for the purchase of the home.  And, unfortunately, they tell their tax professional about it AFTER it has been done.

This is a bad idea.  The distribution is included in the federal and probably also state taxable income of the taxpayer – at a cost of 25% to perhaps as much as 40% of the distribution.  In addition, if the taxpayer is under age 59½ he or she must pay an additional 10% penalty for early withdrawal – bringing the cost of the distribution up to as much as 50%.  So, a distribution of $20,000 only puts $10,000 to $13,000 in the taxpayer’s pocket.

The overall tax and other financial benefits of home ownership may eventually outweigh the tax cost of a 401(k) withdrawal, but I still say this is still not a good idea.

If there is no other source of funds for the down payment consider taking a loan from the 401(k) plan, if allowable, instead of an outright distribution.  The interest rate on 401(k) loans is usually low, and you are actually probably paying the interest to yourself.  This loan must eventually be paid back, or the outstanding balance will be treated as a distribution when employment with the company ends.  FYI, the interest charged on the 401(k) loan is NOT deductible on Schedule A.

One way to avoid the 10% premature withdrawal penalty when a loan from the plan is not an option is to rollover a 401(k) distribution of up to $10,000 into an IRA account and then take a $10,000 distribution from the IRA account.  Or just take $10,000 from an existing IRA account instead of the 401(k) plan.  One of the exceptions to the 10% penalty for premature withdrawals from an IRA account is a distribution for first-time purchases.  A purchase qualifies as “first time” if the taxpayer did not own a home in the two years prior to the withdrawal.  This exception DOES NOT apply to premature withdrawals from a qualified plan such as a 401(k).

So, if you are thinking about buying a home your 401(k) plan should be the last place you turn to for funding the down payment.  And you should discuss it with your tax professional BEFORE you do anything.


Tuesday, July 16, 2019


While working on my summer 2019 newsletter to 1040 clients I came across this verification of a change to the 2019 NJ-1040 that I had heard about - “Bigger deduction for veterans' income tax becomes state law” –

Gov. Phil Murphy on Sunday signed A-5609/S-3960, which increases the gross income tax deduction for veterans from $3,000 to $6,000.

Veterans must be honorably discharged or released to qualify.”

This change will apply to taxable years beginning on or after January 1, 2019.  Veterans who got a $3,000 deduction on their 2018 NJ-1040 will now get $6,000 on their 2019 NJ-1040.


* From FORBES.COM’s TaxGirl Kelly Phillips Erb - “Taxpayer Advocate: You Literally Need A Map To Navigate Our Tax System (So They MadeOne)” -

The map highlights the complexity of tax administration, with its many connections, overlaps, and repetitions between stages.”

* Fellow tax pros – have you seen the July issue of THE TAX PROFESSIONAL yet?

* The IRS has issued a draft copy of a new Form 1040-SR for senior taxpayers.  Hey, it is bigger than a postcard.

* And we return to Kelly Phillips Erb, who borrows a lyric from Peter Allen to tell us about another new Form 1040 – the 2019 draft version - in “Everything Old Is New Again As IRS Releases Form 1040 Draft”.

The new 2019 Form 1040 is the same as the previously mentioned Form 1040-SR without the large print and the Standard Deduction Chart.

The 2018 “postcard” Form 1040, actually bigger than a real postcard, was the stupidest thing I have seen in my 47+ years in the business.  This new 2019, instead of being half a full 8½ x 11 sheet, as Kelly points out “takes up just 2/3 of the page”.  However, it does to some degree bring back the logical flow of the old, far “more better”, Form 1040.  There are still 6 additional schedules to supplement the Form, with some minor changes to the content but not the size for 2019.

One item on the 1040 is noticeably missing – the box to check for “full-year health coverage or exempt”.  Since the Obamacare “shared responsibility” penalty for 2019 and beyond is “0” the IRS no longer needs to know if you had proper coverage.

Trump is many things – ignorant, incompetent, a liar, a narcissist – but one this he is NOT is a Conservative.

Click here for my latest post at TRUMP MUST GO!

Trump is also obviously not a Christian.

Anyone claiming to be a Conservative or a Christian who supports and defends Trump, the Trump Presidency and Trump’s re-election is NOT a Conservative or a Christian.


Wednesday, July 10, 2019


According to IRS Topic 306 –

If you didn't pay enough tax throughout the year, either through withholding or by making estimated tax payments, you may have to pay a penalty for underpayment of estimated tax. Generally, most taxpayers will avoid this penalty if they either owe less than $1,000 in tax after subtracting their withholding and refundable credits, or if they paid withholding and estimated tax of at least 90% of the tax for the current year or 100% of the tax shown on the return for the prior year, whichever is smaller.”

In February of 2018 the IRS revised the federal income tax withholding tables to reflect the lower rates enacted by the GOP Tax Act.  However, as many taxpayers found to their shock when preparing their 2018 Form 1040, withholding was reduced too “liberally” – perhaps on purpose so taxpayers would think that the Act reduced their taxes more than it actually did.  The result was that many taxpayers received substantially reduced refunds than they had in the past or had substantially increased balances due to the IRS with the filing of their returns – even if their income and withholding status and allowances did not change.

As I said back in April in my post “That Was The Tax Season That Was – Part Two” -

Taxpayers did benefit from the lower rates of the Act, but the perhaps $50 per week more in their paycheck was usually more than the actual perhaps $25 tax savings.  The additional $25 or more per week had to be paid back when filing their 2018 return.

In addition, since the Act did away with the deduction for personal exemptions as well as many itemized deductions, the concept of the withholding exemption no longer applied.  Individuals who claimed additional exemptions for a spouse or dependents or for excess itemized deductions and did not revise their withholding for 2018 were royally screwed.  The increased amount and availability of the Child Tax Credit for dependent children under age 17 helped in some cases – but often not enough.

Almost every taxpayer whose withholding was based on the federal tables – and not a flat amount as with most IRA withdrawals and Social Security benefits – was under-withheld.  This was especially disastrous with multiple sources of withholding – like two-income couples, taxpayers with more than one job, and those receiving both pension and W-2 income.  I had clients owing $4,000, $9,000 and $20,000 because of the IRS withholding FU.”

The IRS realized its FU and thankfully, via IR-2019-55 issued on March 22, 2019, somewhat “relaxed” the safe-harbor for avoiding the penalty for underpayment of taxes - going from 90% of current year liability to 80%. 

Recently two of my clients received notices from the IRS assessing a penalty for underpayment of estimated tax using the old 90% of current liability threshold instead of the correct 80% to calculate the penalty.  These penalty assessments are clearly wrong.

I have no idea why the IRS has not made an adjustment to its penalty assessment software program to reflect the change to 80% for 2018 returns.  The Service has also not changed the 2018 Form 2210 to reflect this change.

If you receive a CP 14 or other notice from the IRS assessing a penalty for underpayment of estimated tax for 2018 DO NOT PAY THE ASSESSMENT. 

First check the math on the return, shown on Page 3 of the notice, to verify that the assessment was erroneously based on 90% of the current tax liability.  Then call or write to the IRS to explain their FU, referencing IR-2019-55.  If you write don’t expect a prompt response from “Sam”.  It will probably take 3 months before the issue is resolved.

Better yet – as soon as you receive ANY notice from the IRS or a state tax agency GIVE IT TO YOUR, OR A, TAX PROFESSIONAL IMMEDIATELY.   

You may also be able to further reduce the penalty by submitting IRS Form 2210 to “annualize” your 2018 income.  Another reason to give the notice to your, or a, tax professional – he or she will be able to let you know if this might work for you and properly prepare the Form 2210 for you. 


Tuesday, July 9, 2019


* Some good advice from Sterling Raskie at GETTING YOUR FINANCIAL DUCKS IN A ROW – “Don’t Leave Money On The Table!”.

* Hey tax pros – check out the new July 2019 issue of THE TAX PROFESSIONAL.  It is free – so please share it with colleagues and co-workers.

And in case you missed it, click here for the June 2019 issue.

* Robert W Wood explains “Five Key IRS Rules On How Lawsuit Settlements Are Taxed” at FORBES.COM, pointing out one of the inequities of the GOP Tax Act (highlight is mine) –

A little tax planning, especially before you settle, goes a long way. It's even more important now with higher taxes on lawsuit settlements under the recently passed tax reform law. Many plaintiffs are taxed on their attorney fees too, even if their lawyer takes 40% off the top. In a $100,000 case, that means paying tax on $100,000, even if $40,000 goes to the lawyer.”

* ACCOUNTING TODAY tells us “Trump signs IRS reform bill into law”.  The law = the “Taxpayer First Act”.

Thankfully –

However, lawmakers eliminated a controversial provision that would have codified the Free File Alliance into law after a controversy erupted over whether it would prevent the IRS from developing free tax preparation software of its own.”

I wish the IRS would create a way for taxpayers to submit their 1040 direct to the IRS online free of charge, without having to purchase a commercial tax preparation software program, like NJ does with its NJWebFile program.

* Back to FORBES.COM, where Denise Appleby gives us “4 Tips On Avoiding The 10% Early Distribution Penalty On IRA Distributions”.

* And FORBES.COM’s TaxGirl Kelly Phillips Erb reports “IRS Updates Identity Verification Process To Better Protect Tax Information”.


It is truly a sad commentary on the current state of our country that, based on everything we know about who and what Trump is from what he has said, tweeted and done both before and after being put in the White House, Trump continues to be considered a legitimate and acceptable choice for ANY elected office by anyone – and is apparently the preferred choice of 40% of Americans.

It remains impossible for me to believe that anyone with intelligence and a conscience could ever support Trump for any office.